1st time buyer, need advice/help

If you have enough money for the down payment and the co-op board's requirement for post-closing liquidity, AND your income is relatively solid (or as solid as can be expected in the Obama economy), I see no reason why you shouldn't go for it.

HOWEVER ... I'm hearing "we".

Are you married? If not, an unmarried couple buying real estate is not a wise idea.

Are you planning on having children? It's amazing how quickly that 1-bedroom will become cramped if you are.

Are your payments now the same for a similar place? Why would you tie up money for the same payment?

Perhaps for the enormous tax advantages that come with monthly mortgage payments rather than monthly rent payments?

As I pointed out in another thread, my last rental was $1700/month. My current mortgage/maintenance in a similar apartment (actually a much nicer and slightly bigger) is $2100. But my annual income tax refund as a renter averaged about $1800, versus $14,000 as an owner, lowering my real monthly outlay for my co-op to $933/month.

Yes, we just got married. And yes, we are planning on having kids but not for at least 3 years...I think the apartment could support a child for the first couple years so we should be good for hopefully the next 4-5+ years.

Rhino86 and NYCMatt, that is what I'm struggling with...do we tie up the money and flexibility in order to gain the tax advantages and move to a nicer/larger place with more character?

I also feel like we are getting a good deal on the apartment (good price per square foot, 30% off price from 4 years ago)....if we were in a bind we can rent out the apartment after we have lived there for 2+ years.

how much can you afford to lose and not worry about it?

I have no idea what you guys are talking about...

I can't afford to lose money, seems like a stupid question to me.

Looking for some honest advice here, if you would like to provide some...please do so. If not, find something better to do with your time

trying to help you out but there is a troll here.

if you can't afford to lose money, i would strongly suggest not buying in the current market. nothing is for sure, but the liklihood of flat or up is far out weighed by the liklihood of down; right off the bat, you need to cover close to 10% for your transaction costs when you sell.

"I also feel like we are getting a good deal on the apartment (good price per square foot, 30% off price from 4 years ago)....if we were in a bind we can rent out the apartment after we have lived there for 2+ years."

Be VERY careful about the assumption that you could:

a) rent the apartment out at all (subject to co-op rules, if it is a co-op, that could change at any time), or

b) that you could charge enough rent to cover your monthly mortgage and maintenance.

NYCMatt -- careful, you are giving practical advice someone can understand.

Thank you, I appreciate your help. Are the transaction costs that high when you sell? So it would only be worth it if we were holding for a longer period of time, say 5+ years?

Stop worrying about transaction costs. Seriously.

that completely depends on what the market does. assuming that a longer time frame somehow protects you is a risky way to go. assuming you are talking about an apartment at 600K or more, consider your feelings about possibly losing 20%.

Thanks NYCMATT. I know there are things to consider but I feel as if I'm not gaining anything buy renting. Perhaps I should look at just renting a cheaper place in place of the proposed tax benefits?

you may want to ask matt why he thinks transaction costs aren't real. in these economic times, i would urge caution unless you are in a position to not worry about money.

I obviously don't want to lose 20% so I understand that you don't think now is a good time to buy. The place I'm looking at is less than 500K. Columbiacounty, what do you suggest?

asked and answered, i think.

i'm not understanding the upside of buying the type of place you're describing. stay where you are or get a less expensive rental is that suits you.

if

Check construction quality -- some buildings with duplex apartments in that area built in the 70s / 60s have truly awful cheap construction quality.

With only around 600 sqft of indoor space, you might run out of room quicker than you think, especially if the baby comes earlier than expected. If you are ok with the possibility of staying there with the kid for a few years and you have 9 months savings after closing, then go for it. Make sure you visit a friend with a baby before you sign just to get an idea of how much room the baby stuff takes up. Duplex are also not very baby friendly.

Find out what you can do with the outdoor space. i.e. are you allow to put a large storage bin there?

Sunday, the indoor space is about 725, the outdoor space is additional. And I'll ask about the storage bin. I agree, a baby will make things tight...

Are you sure it's 725??? Bring a ruler next time...

I would suggest looking for a better rental deal instead. The way the rents are these days I'm not sure whether some landlords are even covering their carrying costs, so if you negotiate I'm sure you can get a better deal that would require rental payments even lower than the monthly mortgage plus maintenance on the apartment you were looking to buy.

Isn't the outdoor space closer to 12 X 13 instead of 13 X 13. If you give 10sqft to every room here and there, I guess it can add up to 725...

NYC1,
I am a broker in NYC with a large brokerage company.

Usually don't get involved with threads but I haven't seen anyone ask about the maintenance as that will play a part in the asking price as well as be an important factor in resale.
Also,why don't you have comps from this year as well '06? Perhaps its a small building...and neighborhood comps?

About sqft, Many are close to the money but many are off up to 100sqft which when all said and done may not be such a good price per sqft. Cost is about 150 dollars and I believe a valuable piece of information .If you already have a floorplan with measurements, you can measure it yourself.

Buying vs renting, Generally, buying a place makes sense if you can afford it and have a large enough cushion in the event of downturn. When you rent, that money is gone forever.I would not recommend buying if you don't plan to hold for at least 5 years.

Regarding closing costs, visit any brokerage site and pull a copy of "closing costs for coops", should be in financial tools or soemthing similiar to that heading. There is no way that it is 10% unless you are a seller paying 6% percent to the brokerage community.

It sounds like you are not using a broker and/or perhaps buying direct from a FSBO.
I would be happy to give you a consult , free of charge of course, then you can decide or at least feel more confident in your decision.
This is the largest investment you will most likely make in your life and you should do all your homework.

Hope this was helpful...

I just wanted to take issue with one statement made by Sleon: "When you rent, that money is gone forever."

While true, this is an incomplete statement. When you buy, the common charges, interest payments, and closing costs that you pay are also gone forever. A more complete analysis of the broker mantra that "rent never comes back to you" requires a strict comparison of rent versus the portion of an owner's carrying costs that also never come back to you.

Also if the property depreciates further over the next few years, which is a strong possibility in this market, some of your downpayment and principal payments may also be gone forever. It's possible that NYC real estate will stay flat or recover, and it's possible that it will depreciate further. No one has a crystal ball, but you have to be aware of the risk.

Remember that if you bought a condo in NYC in 1988, then you were probably still underwater as late as 1997. If we are in a similar situation now, as is possible, then you are taking a very big risk by buying an apartment to live in only 5 or 6 years.

You gain something when you rent...shelter. Of course you'd rather own then rent when prices are rising, because you gain shelter and appreciation. Despite what the bulls say, the market is not set up to rise any time soon. So by renting, you gain the option to buy lower later. If you were saving a ton vs. renting (including transaction and opportunity costs) then you could more easily stomach loss (as you could amortize away some of the principal loss each month). The current market does not offer this. Fully costed, owning is more expensive then renting. It sounds like you might just have a bad rental deal.

I must say that buying an apartment in this market that you fully intend to leave in 4 years is pretty questionable. Obviously, s#*t happens, and any buyer today might need or desire to be a seller a year or five years from now. But investing in real estate now intent on selling in under five years is a different story. Never assume that you can rent it, or rent at anything other than a loss. And, do you want to be a landlord 45 miles away in the suburbs?

If you think that you will save money currently by buying vs renting, look around. It is just not the case. It might be some other time in the past or future, but not now.

Asking if you can afford to lose money is not a stupid thought at all. If you asked a stockbroker to buy $500K in junk bonds would that be a stupid question? Sit down with a piece of paper or a spreadsheet and run various scenarios 4-5 years out. If the market drops another 20%, and you are a seller at $400K, and have lost your downpayment AND have to come out of pocket to pay a 6% broker fee, lawyers and closing costs (does your oop have a flip tax too?), will that sabotage your plans of moving to a larger place with children or just be a painful memory like a bad night in Vegas?

The whole tone of this thread and this potential buyer is colored by the last 10 years. Its basically being afraid not to buy for fear of missing upside. Somehow you shouldn't need to save money monthly to drive you to purchase...breakeven is enough. Breakeven should not be enough. Old school mentality is that you don't even want to own a one bedroom apartment. Your time horizon is never long enough in a one bed.

Thanks to everyone for your thoughts and advice. This thread has definitely given me more to think about...As Rhino86 has said, maybe I am colored by the last 10 years. Glad I came on here to get some opinions that make me look at both sides. Thanks again!

If you look through NYT archives for stories from the last crash, you ARE one of the stereotypical couples who should not have bought. Expanding family, <5 year horizon, hopes of renting out.. I would not buy if I were you, unless you can find a large 2+br in a good school zone for less than rent.

If you find that, let me know. I will admit that some 2 bed/1 baths in PS 6 or PS 290 are falling into an interesting price zone...like the $700s.

also do not forget to consider the financial health of the building, is their mortgage paid off? if not what kind of mortgage is it? how many owners to share the cost? etc.

do not buy a co-op if you are serious about renting out the unit in the future.

well said!

Dear Newly-wed!!!
You should probably not buy in this market at this time. Buying is so very seductive (any you're newly wed) ------ but if you've got all the money and are set to buy, just sit tight for a little longer ---- more will come on the market and you will have even better choices.
Also, transaction costs ARE something to factor in. You will want to have a very good attorney looking at the purchase for you all they way through ---- that in itself is expensive.
You could just be buying a huge problem that is also not a growing asset in the near term.
Sit tight ----- buy a little bit later --------
Get addicted to reading SE --- it will help you with the panopticonique info one needs to purchase in NYC.

panopticonique... and panache!

Here's a rule of thumb... Watch for rents to start rising. Until then, there is no reason to even consider buying.

Bearish as I am on the market, this looks to be a good opportunity for the right buyer. Definitely not for the newly wed with a 3-5 yr window before expansion, but certainly for the empty-nester/pied-a-terre/perpetually single crowd. With a +10-yr time horizon and transparent understanding of real costs/risks of owning in a small co-op, the combination of late-02/early-03 ppsf levels and cheap financing could be the right move.

Well, due to inertia, characteristic indecision, logic, and continued revulsion at so many still stupid prices (in my view) in nyc, this potential buyer left nyc for winter without buying.

However, duplexes can be pretty cool if laid out well, so I'm not so sure if one seemed just right and the price was dialed back enough from the peak that it would be nuts to buy...but, if you're only thinking only five years I guess not a good idea.

"the combination of late-02/early-03 ppsf levels and cheap financing could be the right move"...angler, are you saying prices are back to 02/03 levels..i hope so, but i didn't think we're there yet

angler..i guess you are referring to this unit only .

Yes, this unit only. Active trading seems to be at 2005 levels, with some within the 2004 range.

On closer inspection, this unit may really be listed around the 2005 range in its building. The current sellers seem to have overpaid massively in 2006 at $675K when compared to a neighboring unit which went for $450K in Feb-05 then $565K in Mar-07. There will be buyers at the current price since this is where the market is trading. A "high floor" duplex just went for $445K. For my money, this unit would be interesting at sub-$400K. No point paying $640/sft in a bound to be $500/sft building.

what is the building..i didnt think it was listed in the op

It wasn't. I just did a simple search based on the description provided et viola! I refrain from posting it out of deference to the OP.

You're good, angler7! Very good ....
Now go find Osama bin Laden.
Seriously --- I'm impressed.
See folks? Don't reveal too much on SE!

If this apartment is a Co-op unit,renting it out will cause you numerous hassles with the Co-op Board. You may indeed get stuck there, if your family expands and you need to sell.

Please check the Building out, on the websites of DOB and HPD. Open violations and/or overdue compliance is a red-flag.(for both Co-ops and Condo Buildings).
I've owned both, within the last 14 years in Manhattan. I thought a Condo would be better than a co-op -- but I was wrong! Don't trust the Board meeting minutes. My experience is that they are edited on-the-spot, vague as to issues in the Building, and misleading.

I wish that I would have been able to go on-line, and get this kind of feedback, before I bought for the first time (the co-op and the Condo). It is so easy to get important information from the websites of the DOB and HPD. It's free. Good luck, and Happy New Year.

Ah, if only it were that easy to find Osama! Anyway, I'm not the first to have figured it out. Sunday, above, was more coy and displayed greater deference to the OP.

Thanks angler7, I appreciate your help and confidence.

nyc1sttime: Listen to the majority voice and think beyond the last 10 years. I had a friend who bought a coop with her husband, I think in the late 80s. They lived in the apartment for a few years then got divorced and had to rent out the apartment because neither she nor her ex-husband could afford it on their own. After the 2 years were up, my friend had to sell the apartment because of the 2-year limitation on rentals. She had to bring a check to the closing, because by the time she had to sell the market had not fully recovered and she had to make up the difference in what she was netting (after brokers' fees) vs. what was outstanding on the mortgage.

That's certainly what I'm leaning towards. I guess I was just looking at the positives and not the potential risk.

Sometimes to break the compulsion to buy, you just need to go on a quick vacation. Hop on a flight to a warm climate. Forget about buying real estate for a while.

Well, even tho i had decided to "wait and see" what happens in the market, I really felt like buying (compulion surge) one particular place at 70 berry wmburg, but I think someone else took it, and I like that hood, particularly that part of that hood, so I hope more comes available, especially with outdoor space.

Also, my thoughts have evolved a bit as I read on here and think about things: want to avoid the kent avenue hi-rises even if prices come down because don't want high cc, the "urban grit" view from a friends sixth floor unit in wmburg is actually nicer than i thought, altho not as nice as a skyline view, discovered that the metro rumbles under 7th street wmburg when i was looking at one place there....so, conflicted but opted to wait and get more info. Compulsion tamed for now.

Not to hijack the thread, but..I think urban views of brick facades, factories, etc. is more interesting at say sixth floor level, than from way up in a hi-rise looking down where it just looks bleak.

poorish, maybe that's why we've been travelling so much recently. i've also been spending a lot of time on vacation rental websites. there are many lovely locations where you can rent monthly for about the cost of maintenance in nyc. i think i've got the buying compulsion beat.

jim, take your time. it's yours to take.